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Global Fundamental Analysis 26/09/2022

Global Fundamental Analysis 26/09/2022, FP Markets

Opening Call: The Australian share market is to open higher.

U.S. stocks continued to slide amid a global selloff. The yield on the 2-year Treasury ticked higher to 4.21%, while the 10-year yield ticked lower to 3.69%. The WSJ Dollar Index gained to 104.1, helping push gold futures to their lowest level since April 2020. Oil prices sank as investors continued to worry about a recession and weak demand.

Australian Market

Australia’s S&P/ASX 200 gave back 1.9%, tumbling to its lowest close since July 1, as investors responded to rising global interest rates. The benchmark index shed 2.4% for the week and has lost ground in four of the last five weeks. All 11 sectors fell, led by tech, consumer discretionary and real estate.

US Market 

A wave of selling in financial markets swept across the globe, with nervous investors forced to again confront the specter of recession. Investors, mulling stubbornly high inflation and unnerved by Russia’s attempts to escalate the war in Ukraine, have fled for the exits this week, driving a concurrent selloff in stocks and bonds. Bond yields remained near their highest levels in more than a decade as prices tumbled.  

The Dow Jones Industrial Average lost 1.6%. The S&P 500 dropped 1.7%. The Nasdaq Composite declined 1.8%. The three indexes tumbled for a second consecutive week in a selloff that has dragged down the S&P 500 by 9.2% and the Dow by almost 8%. That marked their worst two-week declines since June. The Nasdaq has fallen more than 10% over the past two weeks, its biggest such decline since March 2020, during the pandemic-induced market crash.

Commodities

Gold futures settled at their lowest price since April 2020, under pressure as the U.S. dollar soared versus major rivals and short-term bond yields jumped amid fears aggressive monetary tightening by central banks could spark a global recession. Gold futures for December delivery fell 1.5% to settle at $1,655.60 an ounce on Comex, the lowest for a most-active contract since early April 2020. For the week, prices ended 1.7% lower, according to Dow Jones Market Data.

“The pressure gold is coming under in the current macroeconomic environment, with interest rates going up across the world and likely to continue doing so for a number of months yet, means it is hard to see how the metal can make gains with the question more about how low it will go,” said Rupert Rowling, market analyst at Kinesis Money.

Oil Futures

Oil prices dropped sharply, with U.S. crude down more than 5% to its lowest since January, as recession fears gripped financial markets, sinking equities and government bonds, while contributing to a further rise by the U.S. dollar. West Texas Intermediate crude for November delivery fell 5.6% to $78.83 a barrel on the New York Mercantile Exchange, with prices for the front-month contract down nearly 7% for the week. November Brent crude dropped 4.7% at $86.24 a barrel on ICE Futures Europe, down nearly 6% for the week.

“Oil is trading down in sympathy with the broader financial markets, as traders grapple with fears of a massive recession,” said Manish Raj, chief financial Officer at Velandera Energy Partners. “Geopolitical tensions in monstrous proportions, inflation at a multi-decade high and the dollar surging unabated are all certain to cause demand destruction for oil.”

Forex

Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$0.9837 to lows near US$0.9668 and was near US$0.9690 at the US close. The Aussie dollar dipped from highs near US66.32 cents to lows near US65.12 cents and was near US65.25 cents at the US close. And the Japanese yen fell from near 142.09 yen per US dollar to JPY143.46 and was near JPY143.30 at the US close.

European Markets

European sharemarkets closed lower on Friday. The panEuropean STOXX 600 index fell by 2.3%, taking weekly losses to 4.4%. The S&P Global euro zone composite purchasing managers’ index (PMI) fell from 48.9 to 48.2 in September (survey: 48.2). The German Dax index dipped 2.0% to its lowest level since November 2020. The UK FTSE 100 index also lost 2.0% after the UK government announced a raft of tax cuts, fuelling concerns that heightened inflation could lead to higher rates.

Asian Markets

Earlier Friday, Chinese stocks extended recent declines after more central banks raised interest rates, fueling concerns about a global recession. The benchmark Shanghai Composite Index declined 0.7% and the Shenzhen Composite Index fell 1.4%. The tech-heavy ChiNext Price Index lost 0.7%. Industrial companies, including steelmaking suppliers, electric-machinery makers and rubber producers, led losses.

Hong Kong’s Hang Seng Index lost 1.2%, further weakening from Thursday’s close, which was the lowest in almost 11 years. An end to hotel quarantine for inbound travelers announced by the government failed to cheer investors, as sentiment is still weighed by a dimmer economic outlook. The benchmark index lost 4.4% for the week.

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